IMF First Deputy Managing Director Gita Gopinath has met with Finance Minister Ali Sabry and CBSL Governor Dr. Nandalal Weerasinghe and signalled that the IMF will look at the difficult situation Sri Lanka is facing and look to assist.
Gopinath met the two officials yesterday at the IMF-World Bank Spring Meetings. Gopinath who was born in India has advocated the reduction of the usage of the US Dollar in International trade and called on countries to invoice regional trade in one of the regional currencies.
Gopinath tweeted, “It was very good to meet Sri Lanka Minister Ali Sabry and Governor Weerasinghe at the IMF Spring Meetings and discuss the difficult challenges Sri Lanka faces and what is needed.”
Gopinath notes ‘The rupee price and volume of India’s imports from China depend more on the rupee-dollar exchange rate than the rupee-yuan exchange rate if import prices from China are set in dollars.
Gopinath later added ‘A large amount of trade invoicing in dollars generates demand for dollar safe assets that in turn depresses the dollar interest rates making it a cheap funding currency and therefore encouraging borrowing in dollars. The latter in turn encourages exporters to invoice in dollars to tap cheap dollar funding which then only reinforces the first effect.’
India has signalled willingness to lend to Sri Lanka and allow overseas borrowing in Indian Rupees. This alongside systems that invoice Indian export in Indian Rupees has been called for by the importer community to ensure an adequate supply of essentials in the interim period before an IMF agreement.
Sabry and Weerasinghe also met with the US State Department Bureau of South and Central Asian Affairs and had a fruitful discussion. US State Department Assistant Secretary Donald Lu discussed overcoming the ongoing economic challenges in Sri Lanka. In a tweet, the Bureau stated, “The U.S. welcomes Sri Lanka & IMF working towards a sustainable solution to relieve the economic hardships for its people.”